Commodities and basic materials are not exactly a popular investment theme these days. Citicorp analysts predict oil is vulnerable to $20, the demand for industrial metals has plummeted, chemical companies can’t get any traction, and farmers aren’t buying any more equipment, supplies and fertilizer than they must.  Of course, we don’t invest for today; we invest today to be where we want to be  tomorrow.  If only we could add some hi tech to the mix, it’d be great.  And, what the heck, let’s dare to dream and say if we can do it with a near 7% yield, we’d like it even better!  

Well… there is a country ETF we’ve owned before that may be just the ticket: the Global X Norway ETF (NORW.)  One caveat before we go on.  This is not a currency-hedged ETF.  If the US dollar continues to climb against every other world currency, our returns in Norwegian kroner will take a haircut when the fund translates those returns into dollar-denominated numbers.  I may be in the minority here, but I am skeptical that the dollar will continue its meteoric rise.  QE in Japan and Euroland is likely to have a beneficial effect on those economies as investors begin to perceive that they may not be such basket cases after all.  And, about the dollar?  Trees do not grow to the clouds.  With oil priced in dollars, either the entire oil-consuming world will rebel at the prices they must pay in inflated dollars or we will have to intervene and cool its ascent.

Besides, if ever there was a nation that is likely to enjoy a strong currency when others fail, it would be one that has a $900 billion sovereign wealth fund established for the future of its people, a nation blessed with abundant natural resources in demand for export trade, and a AAA country credit rating from S&P, Moody’s and Fitch.  That would describe Norway, so I’m less concerned with currency fluctuation here 

The #1 largest position held by NORW is Statoil (STO) which I have discussed a number of times in the past and which we currently hold in our growth & value portfolio.  STO comprises 16% of NORW and I think that’s just dandy.  Sure STO is down right now — it is, after all, an oil stock.  But if you wanted a rock solid anchor for your ETF, I don’t believe you could do better.  Statoil is an industry leader in terms of its interest coverage, cash to debt ratio, operating and net margins, ROE, ROA, revenue growth, and earnings per share growth.  It sells at a trailing PE of just 10, which I imagine will be more like 15 this year, given the supply/demand matrix in the oil patch.  It’s price/book ratio is just 1.2, price/sales 0.7 and its EV/EBIT only 3.15 (which may well be the lowest in the entire industry; even XOM’s is higher at 6.81.)

Further, Statoil may be a company “headquartered” in Norway but its reach is decidedly global.  In competition with Russia, it sells natural gas to Europeans.  It is a major player in the US with active operations in the Bakken Marcellus, Eagle Ford and offshore Gulf of Mexico.  In India, Mexico, my old stomping grounds of Myanmar, and 30 other nations, Statoil’s experience in deep oceans and on the Norwegian continental shelf is the company’s entrée to joint venturing for deep water exploration.  Fracked wells are easy to establish — but have a short life and an expensive tail.  Deep water is where the next elephant fields will be found, and Statoil is there.

The 2nd biggest holding of NORW is DNB, Norway’s largest financial services firm, underwriter, and bank. It, too, has a global reach, as befits a nation that is a giant in both energy and shipping, with offices in Houston, New York, London, Shanghai, Singapore, Mumbai, and numerous points between these.

#3 on NORW’s hit parade is Telenor (TELNF.)  Norway has long produced engineers, entrepreneurs and technology firms out of proportion to the size of its population.  Telenor is but one example.  It is just out of the top ten telecom companies in terms of revenue, falling below Nippon T&T and Australia’s Telstra, but in another measure of size, total number of mobile subscribers, it is bigger than AT&T or Verizon and only slightly smaller than China Telecom.  AT&T and Verizon focus mostly on the overpriced, thus very profitable, USA, but Telenor owns networks in 12 countries and has other operations in 29 more.

My first interaction with Telenor occurred some 20 years ago or so.  I was in Italy trying to call back to my office in the USA.  Cell phones weren’t even available in those telephonic Dark Ages, so I bought two different phone calling cards, neither of which worked of course, and spent nearly an hour in gesticulatory Italian slugging it out with the vendor that sold them to me to get him to take back two in exchange for a third one that *I* selected from his collection.  He finally acquiesced when I used two  important-to-know Italian words: “Polizia, ora!”  Then I made the call from the 4th pay-phone I visited (the first one that actually worked) and had the pleasure of dealing with an operator who spoke only Italian and clearly had more important things to do.  “Lentamente, per favore,” (More slowly, please) is all I could get in before the $7 I’d invested in this enterprise ran out.  An hour later we flew to Norway.

I still hadn’t gotten answers I could only get via phone.  We checked in to the airport hotel in Oslo about 10 p.m. and I shuddered as I asked the front desk what it would cost to call the US from my hotel room.  “Two kroner” was the answer.  That was the equivalent of about 33 cents back then.  “No, you don’t understand,” I said.  “I want to call America.  From my room.”  She looked at me quizzically and said, “Yes.  That will cost you two kroner.”

Later on that same trip, I discovered that I could put any credit card into any pay phone in Norway and make that same call back home for that same 33 cents.  I was forever sold on Telenor, and it seems lots of others are, as well.  The company has operations in Norway, Sweden and Denmark, but also all over Central Europe and South and Southeast Asia from Pakistan to Malaysia, the prime areas of the world Telenor’s strategic planners have deemed underserved and with fast-growing populations.  They also reach into Russia, the ‘Stans and elsewhere via their 33% joint venture with Russia’s Vimpel, and have extensive broadcasting and TV distribution throughout Scandinavia.

I could go on about NORW’s other holdings, but suffice it to say they are an accurate representation of Norwegian companies and that nation’s entrepreneurialism and innovation.  They include Yara Intl, the global chemicals and agricultural fertilizer company; Norsk Hydro, the aluminum and hydroelectric power firm; Schibsted, international publisher of print and online newspapers and information; Marine Harvest, which provides salmon and other seafood worldwide; Opera Software, the Internet browser, cloud provider, and more; and Norwegian Air Shuttle, which provides what is quite possibly the best bargain fares from the US to most of the key European gateways and which is growing like Topsy.

NORW’s average PE is 11.  It sells pennies from its low for the past year.  And it yields 6.75%, payable only at year-end.  For us -- it’s a buy.  

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